National CineMedia Shares Upgraded To Outperform

In a report published Tuesday, analysts at FBR & Co upgraded

to Outperform. The price target was set to $17.50. Pacing data suggested strong growth for the full year for the company. "Our checks make us less concerned about the risk of a return of destructive competition… and maintenance of a modicum of 2015 momentum into 2016, which appears likely, would argue for additional revenue growth that should go straight into dividend hikes that fuel the equity," the analysts said. National CineMedia expects to be able to achieve the top end of its revenue and OIBDA growth guidance for 2015. Given the strong box office releases slated for 2H, the analysts believe that the guidance could be easily beaten. While the company expects a 5 percent increase in audience in 2H, FBR & Co believes that there could be a mid-single-digit decline, along with tough comps in the remainder of May. According to the analysts, however, "NCMI can hedge this risk by driving up sell-out rates and generating make-goods that would lift revenues in 3Q15, and not have any impact on the year. So NCMI is less exposed to box office risk than theatrical peers." Theatre ad pricing has also stabilized, following the 16 percent decline in 2014.